ALLAHABAD BANK vs CHANDIGARH CONSTRUCTION CO. PVT. LTD.

THE Consumer Disputes Redressal Forum, Union Territory, Chandigarh, vide order dated 15.11.1993 in Complaint Case No. 1256 of 1992 allowed the complaint and directed the Opposite Party Bank to pay the value of the FDRs with interest at the rate of 18% p.a. from 1.10.1990 till the date of payment. The Opposite Party was also directed to pay to the Complainant Rs. 2,000/- for harassment and Rs. 500/- for costs.

AGAINST that order Petitioner preferred an Appeal No. 217 of 1993 before the State Commission, Chandigarh, which was dismissed vide order 26.2.2003. Hence, this revision. The facts in brief are that Chandigarh Construction Co. Pvt. Ltd., Complainant (Respondent before us) got a bank guarantee issued from the Allahabad Bank, Opposite Party (Petitioner herein) for a sum of Rs. 1,52,000/-against security in the shape of FDRs worth Rs.1,50,000/- and sent the bank guarantee to the Executive Engineer, Patiala Ki Rao, Construction Division, S.Y.L. Canal Project, S.A.S. Nagar (Mohali). The validity period of the bank guarantee was upto 28.9.1990. Since the Bank had not released the FDRs to the Complainant after the expiry of the bank

GUARANTEE , the Complainant was forced to approach the District Forum for a direction to the Respondent to release the FDRs with other reliefs.

IT was contended by the Opposite Party before the District Forum that, (i) the complaint is a frivolous one; and (ii) the beneficiary has invoked the bank guarantee within time. The District Forum observed that the material date for invoking the bank guarantee is the date on which the letter of Executive Engineer invoking the bank guarantee fell into the hands of the Bank, and not the date of the letter; the Opposite Party failed to produce receipts-register to find out as to the date on which the Bank had received the letter from the Executive Engineer, since the letter of invocation has not been received within the stipulated time, i.e., 28.9.1990, the Opposite Party should have suo motu released the FDRs to the Complainant; even after serving the registered notice dated 24.5.1991 on the Executive Engineer, mentioning therein that in case the guarantee bond was not returned within 15 days, as per the guarantee''s automatic cancellation clause, the bank shall be free to treat the guarantee as cancelled, the bank did not release the FDRs to the Complainant; even if the Punjab Government through its Executive Engineer had invoked the guarantee within the prescribed time, it would not have had any legal effect for the reason that the contingency contemplated by the parties to the guarantee and incorporated in the guarantee bond itself had not arisen, to provide a cause of action to the Punjab Government for lodging a claim for the realisation of the guarantee. Findings:

THE question is whether the bank was justified in withholding the FDRs even though the bank guarantee invocation letter was not received on 28th September, 1990. Secondly, whether there was any justified ground to withhold the same after knowing the fact that the State Government has paid Rs. 18 lakhs and odd on 29th August, 1990; and thirdly, whether there was any reason to withhold it after the District Forum passed the order on 15.11.1993.

WE have heard the learned Counsel for the parties. We have also perused the records. Admittedly, the Bank issued bank guarantee to the tune of Rs. 1.52 lakhs in favour of the Executive Engineer, Patiala Ki Rao, Construction Division, S.Y.L. Canal Project, S.A.S. Nagar (Mohali) on 29.3.1990 which was valid upto 28.9.1990. It is the contention of the Bank that by letter dated 25.9.1990 the Executive Engineer issued a letter invoking the bank guarantee. The said letter was delivered to the bank on 1.10.1990. Admittedly, the city of Chandigarh was under curfew from 22.9.1990 till 28.9.1990.

FIRSTLY , it is to be stated that there was no justifiable reason for the Bank to retain the FDR after the District Forum passed order dated 15.11.1993. Even thereafter the FDRs were not returned but were returned only when this Commission passed the order on 8.5.2003.

SECONDLY , before the District Forum it was pointed out that the Executive Engineer who has written the alleged letter invoking the bank guarantee had made payments by account payee cheques to the Opposite Party on 29.8.1990 as under: Thirdly, admittedly the bank guarantee invocation letter dated 25.9.1990 was received on 1.10.1990, i.e., after the prescribed date and the letter itself is vague, which reads as under: "The validity of the bank guarantee No. 90/07 dated 29.3.1990 amounting to Rs. 1.52 lakhs tendered by your bank as security deposits against works RD 71 to 71.5 and 71.5 to 72.5 kms. allotted to M/s. Chandigarh Cons. Co., is expiring on 28.9.1990. The department still needs extension of above bank guarantee which the agency has failed to submit. As such, claim to the tune of Rs. 1.52 lakhs against above bank guarantee may be registered on behalf of department. This claim will, however, not be pursued in case extension of bank guarantee valid upto 31.3.1991 is submitted within 10 days'' time."

APART from the aforesaid vague invocation letter which was not received by the Bank before the expirty of bank guarantee, the relevant terms of the bank guarantee leave no doubt that the bank guarantee was required to be invoked on or before 28th September, 1990 and that stood cancelled automatically. The terms are as under: "Notwithstanding anything hereinbefore contained our liability under this guarantee is restricted to maximum amount of Rs. 1.52 lakhs (Rupees one lakh and fifty-two thousand only). Our guarantee shall remain in force until 28th September, 1990. Unless a suit or action to enforce your claim or claims under the guarantee is filed against us before the said date, all your rights under the said guarantee shall be forfeited and we shall be released and discharged from all liabilities thereunder. This guarantee shall be deemed to be cancelled automatically after 28th September, 1990, until and unless extension is granted by us."

THE other relevant correspondence is letter dated 30th October, 1990, written by the Executive Engineer to the Manager, Allahabad Bank, wherein it has been stated that claim to the tune of Rs. 1.52 lakhs was registered before expiry of time of guarantee and that office has proper receipt of postal authorities to that effect; therefore, keeping in view the Government interest a demand draft for a sum of Rs. 1.52 lakhs may be sent in favour of the Executive Engineer. Similar letter dated 14th January, 1991 is also produced on record. Thereafter, the Bank gave a registered notice dated 27th May, 1991, to the Executive Engineer stating that guarantee bond should be returned in view of the automatic cancellation clause of the guarantee bond.

FROM the bank guarantee clause stated above it is apparent that the guarantee stood cancelled as it was not invoked prior to 28th September, 1990.

IT is also to be noted that before the District Forum petitioners have failed to produce anything on record to the effect that the letter dated 25th September 1990 was sent by Registered Post by the office of the Executive Engineer. In any set of circumstances, there is nothing on record to establish that the Government has taken any action against the contractor for recovering any amount. The terms of the bank guarantee as quoted above specifically provides that unless a suit or action to enforce a claim under the guarantee is filed the rights under the said guarantee would stand forfeited. Despite all these facts, the officers of the Bank remained adamant and refused to release the FDRs. As stated above, there was no justifiable reason for the Bank to withhold the same after May, 1991. In this view of the matter, the order passed by the State Commission confirming the order of the District Forum cannot be said to be in any way illegal or erroneous.

HOWEVER , with regard to rate of interest, in our view, the order requires to be modified, and the same is reduced from 18% to 12% p.a.

IN the result, revision application is partly allowed. The impugned order holding that there is deficiency in service on the part of the officers of the petitioner stands confirmed. However, petitioners are directed to pay interest at the rate of 12% p.a. from 1st October, 1990 till the amount is paid in 2003 on the basis of the order passed by this Commission. There shall be no order as to costs.